A stage from the Lions Gate movie ""Precious: Based on the Novel "Push" by Sapphire"".
Credit: Reuters/Handout
LOS ANGELES/NEW YORK (Reuters) - Billionaire financier Carl Icahn offering on Friday to buy Lions Gate Entertainment Corp (LGF.N), in a move written to hinder the studio"s approaching bid for storied opposition Metro-Goldwyn-Mayer Inc MGMYR.UL.
Shareholders are doubtful to punch since Icahn"s suggest is low, but the financier hopes to frustrate Lions Gate"s bid for MGM, the struggling college of music at the back of the "James Bond" franchise, analysts say. Second-round bids for MGM are due Friday, sources have formerly said.
In a statement, Icahn argued that Lions Gate should concentration on consolidating movie and TV placement rather than buy movie libraries, and due replacing tip management.
Shares of Lions Gate finished 1 percent higher at $6.03 -- only a couple of cents on top of Icahn"s $6 suggest price.
"He has to comprehend that with the shareholder tenure (of Lions Gate) so strong between a couple of firms, he"s not going to get to 50 percent. Those guys don"t instruct to sell at $6," pronounced Matthew Harrigan, an researcher with Wunderlich Securities.
But Icahn"s move "certainly creates it some-more formidable for Lions Gate to mountain a bid," Harrigan said.
Mark Rachesky, Icahn"s former investment chief, and his MHR Fund Management own about a fifth of Lions Gate as the singular largest shareholder. He has not voiced seductiveness in Icahn"s suggest but has pronounced he upheld Lions Gate"s board.
Lions Gate, that backs the "Saw" authorization and critically acclaimed "Mad Men" TV series, is penetrating on picking up MGM"s living room of often comparison hits to accelerate the own. Media companies are introspective identical acquisitions in an bid to set up content, as movie audiences quit in larger numbers to on-demand video and Internet streaming.
The college of music is penetrating to rise a authorization of the own, either it be formed on Bond -- deemed the majority successful movie authorization in story -- or on the arriving "The Hobbit," formed on J.R.R. Tolkien"s novel and a prequel to the box-office bullion cave that was the "Lord of the Rings" trilogy.
"Lions Gate"s living room does not suggest such authorization potential," Thomas Weisel researcher Benjamin Mogil wrote in a note.
HOW LOW CAN YOU GO?
Icahn appeared to subject Lions Gate"s seductiveness in MGM -- that was not referred to by name -- citing shrinking DVD sales as contributing to the decrease in all film-library values.
"It should be up to the shareholders to establish if they instruct to some-more than "double down" on an additional library, generally in light of the company"s certified "substantial grade of leverage,"" Icahn pronounced in the statement.
The romantic investor, who has publicly hold the college of music to charge for the $255 million merger of "TV Guide" in 2009, has right away offering to buy all of Lions Gate"s superb usual shares for $6 apiece, amending a Feb suggest to buy 13.2 million shares at the same price.
Icahn, who owns slices in a extended tie of U.S. companies such as American Railcar Industries Inc (ARII.O) and is well known for perplexing to shift the citation of companies such as Time Warner Inc (TWX.N), owns 18.9 percent of Lions Gate.
A deputy for Lions Gate did not lapse calls.
Lions Gate"s house has incited down Icahn"s suggest as as well low. It not long ago due that shareholders adopt a defensive rights plan, or poison pill, to assistance sentinel off attempts to amass shares.
Cowen Co researcher Doug Creutz estimates that Lions Gate is value twenty percent some-more than the stream marketplace valuation, formed on a regressive sum-of-parts valuation.
Icahn pronounced he had no seductiveness in raising his strange offer, that he argues was already $1.15 higher than the $4.85 shutting cost of Feb 4 -- prior to he launched his initial offer.
Icahn pronounced he dictated to aspire to authorised movement opposite Lions Gate"s poison pill. If his suggest were successful, the Icahn Group would reinstate the studio"s house of directors with the own nominees, he said.
Lions Gate is approaching to put in a second-round bid for MGM, sources informed with the have a difference have told Reuters. Bids for MGM are due Friday, and the sources additionally design Time Warner and Len Blavatnik"s Access Industries to have offers.
Some investors sojourn shaken that a shift of carry out of Lions Gate competence trigger debt obligations that the college of music competence not be means to fulfill.
Lions Gate has pronounced if Icahn increasing his interest in the association over twenty percent, it could trigger a "change of control" proviso in the company"s revolving bank loan facility, that would consecrate a technical default.
Lenders could accelerate the majority of superb debt and down payment holders could do the same.
(Editing by Edwin Chan, Gerald E. McCormick and Matthew Lewis)
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